Contest for Head of WTO Pits Washington’s Candidate and Program Against Most of World

Back in 2004, when negotiations for the Washington-driven “Free Trade Area of the Americas” were heading for collapse, the Brazilian co-chair of the negotiations, Adhemar Bahadian, colorfully described the disillusionment that had set in. He compared the agreement to “a stripper in a cheap cabaret.”

“At night under the dim lights, she is a goddess,” he told the press. “But in the daytime she is something different. Maybe not even a woman.”

Many countries have now gone through a similar process of disenchantment with the World Trade Organization (WTO), created in 1995 as a “multi-lateral” alternative to bilateral or regional agreements. From the beginning, the rules were stacked in favor of the rich countries. (More on this below). But in addition to the rules, the rich countries, led by the U.S., never got used to the idea that a multilateral institution was supposed to be for the benefit of everyone, including developing countries. They were too accustomed to the IMF and the World Bank, which have been run by Washington and its rich country allies for more than six decades. The WTO, unlike the Fund and the Bank, was set up to operate by consensus, but some members have turned out to be a lot more equal than others.

The rich countries are making this clear once again as the U.S. and EU try to ram through their choice of Director General, which will be decided on Tuesday. Pascal Lamy of France, a former European Trade Commissioner who represents the rich countries’ point of view, will step down this year after two four-year terms. Now it is the developing countries’ turn to have the position, and the final selection round (in a less-than-transparent process) has boiled down to Herminio Blanco of Mexico versus Roberto Azevêdo of Brazil. While this appears to be a contest between two Latin American candidates, it is clear to most of the world that Blanco is more of a candidate of the United States and its allies.

First, the government that he comes from, as the saying goes, is too “far from God, and so close to the United States.” It is not just geography and economic integration but a shared neoliberal set of policies that binds Blanco to his northern neighbors. He is an architect of NAFTA, a treaty that wiped out hundreds of thousands of farmers in Mexico (by forcing them, ironically, to compete with subsidized crops) and kept the country on a development path that can only be described as a failed experiment.

Since much of the business press has lately been celebrating the fact that Mexico is momentarily growing faster than Brazil, let’s compare the two countries’ performance since the Workers’ Party took office in 2003. Brazil’s GDP per person has grown by 28.6 percent, while Mexico’s has grown only 12 percent, the second worst record (after Guatemala) in all of Latin America. Maybe the Workers Party understands something that Mr. NAFTA-Chicago-boy doesn’t. (Blanco’s economics Ph.D. is from the University of Chicago, most infamous for producing the far right of the profession and known throughout Latin America for “Los Chicago Boys,” the Milton Friedman protégés that advised dictator Augusto Pinochet in Chile.)

The difference between Mexico and Brazil is more than the symbolism of their candidates, and goes beyond the fact that Brazil is vastly more independent of the United States; and beyond the reality that each of these candidates would inevitably be influenced by the policies and alliances of their governments. One reason that the WTO has failed to move forward on its agenda more than 11 years is that it has a program conceived of in a different era, and one that would never have gotten off the ground if it were submitted to member countries today.

From 1980-2000 there were a pronounced slowdown in economic growth in the vast majority of the world’s countries, coupled with a decline in progress on social indicators such as life expectancy and infant and child mortality. This coincided with what are known as “neoliberal” policy changes – which included not only tighter monetary and fiscal policies, privatization and de-regulation, but also an abandonment of state-aided development strategies that had previously been successful in many countries. The WTO rules, written by the rich countries toward the end of this period, were designed to expand trade in ways that did not take development needs into account. Trade can certainly make a sizeable contribution to growth, as it has for China over the past three decades, but China’s trade (and foreign investment) was carefully managed as part of an overall development strategy.

The past decade, despite the Great Recession and the seemingly endless recession in Europe, both caused by flawed economic policy-making in the rich countries, saw a rebound in developing country growth. Ironically, much of it was spurred by demand from China, the biggest economy to reject the policy “reforms” of the neoliberal era and which has now become, by the best measures, the world’s largest economy.

The world is a different place, yet the U.S. and its high-income allies act as though nothing has changed. Imagine, after financial de-regulation contributed to the world’s worst recession since the Great Depression, they continue to push for further liberalization in financial services. They want developing countries to lower their tariffs on manufactured goods while they spend hundreds of billions annually subsidizing their agriculture, and resist developing countries efforts to protect their own agriculture and poor farmers.

And of course they promote the most costly form of protectionism in the world: the protectionism of the pharmaceutical companies. This is the very opposite of the “free trade” that they claim to promote, with these monopolies, protected and expanded by the WTO’s TRIPS (“Trade-Related” Aspects of Intellectual Property Rights), raising the price of pharmaceuticals by hundreds or even thousands of percent – dwarfing any developing country tariffs on computers or electronics. Not to mention the health effects of over-pricing essential medicines and impeding life-saving research. In this realm, too, Brazil has led important steps to challenge patent monopolies and in favor of public health, while Blanco’s NAFTA gave further protection to the pharmaceutical companies.

In contrast to Blanco, who made his reputation by negotiating neo-liberal trade agreements driven by special interests, Azevêdo is a diplomat with long experience in the WTO, widely seen as technically skilled and with a good reputation in WTO circles. The choice should be a no-brainer for anyone who would like to see the WTO move toward a public-interest agenda. And this should include not only developing countries: U.S. residents lose about $290 billion a year from the monopoly pricing of pharmaceuticals that the WTO was designed to protect. But unfortunately we are not represented there, it is only our largest corporations that have a voice.